Base rate cuts may be limited, says Bank

The Bank of England has said its scope for base rate cuts is limited as it released its quarterly inflation report today.

In its publication of data projecting the potential effect of inflationary and deflationary pressures, the Bank said it had to achieve a balancing act between the potential effects of an economic slowdown and a possible rise in inflation above three per cent, the figure at which governor Mervyn King would have to write a letter to the chancellor of the exchequer outlining interest rate policy.

Mr King warned that to reduce rates as low as the markets expected - 4.5 per cent - could carry that risk.

As a result it may be that the prospects for major cuts in mortgage rates have receded, making self build a better alternative option for those looking to own their own home.

Next week (February 20th) may reveal more about the Bank's thinking as the minutes of this month's monetary policy committee meeting are published, revealing the size of the vote in favour of the rate cut.


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